Age of austerity to continue for decades says OBR

13th July 2011

This is despite George Osbourne's spending squeeze. The OBR, set up by the chancellor to produce independent projections of the public finances, says the rising cost of healthcare and pensions, and declining tax revenues from the North Sea, will mean future governments have to take action to prevent uncontrollable debt levels, says the report.

The report says that without fresh tax rises or spending cuts the government's debt will hit a trough of 60% in the mid 2020s, compared with less than 70% now, before rising rapidly to hit 107% of GDP by 2060-61.

The OBR urges the government to make decisions now, to prevent the economy drifting into a debt crisis as the population ages.

"Policymakers and would-be policymakers should certainly think carefully about the long-term consequences of any policies they introduce in the short term. And they should give thought too to the difficult choices that will confront this country once the challenge of the current consolidation has passed," the study says.

BBC Economics editor Stephanie Flanders says on her blog: "If you're the kind of person that likes a good fiscal horror story, you'll find plenty of scary sounding numbers in today's report from the OBR on the long-term state of Britain's public finances.

"However, if you're not that kind of thrill seeker, you might well come away from this report somewhat reassured.

"By page 3, we've learnt that a broader definition of the government's net liabilities leads to a net debt figure of £1,216bn, or nearly 85% of GDP, compared with the traditonal measure of debt, which is now £760bn, or 53% of GDP.

"We've also learned that, on unchanged policy, the ageing of the population is going to push up spending over the next 50 years as a share of the economy – while tax revenues would be broadly flat." If policy remains unchanged, we have a problem, she concludes.